Budget and Government Efficiency Committee Meeting - January 15, 2025

The Budget and Government Efficiency Committee met on January 15, 2025, to discuss and act on fee adjustments for short-term residential occupancy, set committee priorities for the 2025 work plan, receive informational reports on charter-obligated services and prevailing wage compliance, and hear public testimony on various topics. Key actions included approving consent calendar items, advancing revised short-term rental fees with additional analysis, and adopting a work plan.

Consent Calendar

• The committee unanimously approved the consent agenda, which included the approval of committee minutes from December 11, 2024. No items were pulled.

Public Comments & Testimony

• Non-Agenda Public Comment: Speakers addressed a range of issues. Cesar Javier voiced concerns about a ceramics manufacturing operation in a residential zone and called for stronger enforcement. Other speakers advocated for youth internships, marijuana prevention, equity reporting in budget documents, and fiscal responsibility. Several speakers emphasized the economic costs of substance abuse and the need for prevention funding.
• Consent Agenda Comment: Cesar Javier urged publicizing meeting records for transparency. Blair Beekman stressed the importance of accountability and best practices in the five-year plan.
• Item 2 – Short-Term Rental Fees:
  • Jay Goldberg (NICENABERBERS.org, volunteer STR compliance) argued that proposed fees are too low compared to other cities and noted that 23% of San Diego short-term rentals are corporate-owned, calling for higher fees and stronger enforcement.
  • A virtual speaker (phone ending 7968) asked the committee to consider the program’s impact on the housing crisis and suggested raising fees, especially for corporate owners.
• Item 3 – Committee Priorities:
  • Speakers supported the committee’s priorities, with one noting the importance of key performance indicators, IT upgrades, equal opportunity contracting, employee morale, alternative revenue, and homeless shelter feasibility.
  • Blair Beekman praised the city council and urged accountability.
  • Becky Rapp, a public health educator, requested a deep dive into marijuana business tax collections, citing a city auditor report that less than 50% of businesses paid taxes, and asked for a presentation on current collections and allocations.
• Item 4 – Charter Obligated Services:
  • Cesar Javier asked for legal assistance for community issues. Other speakers requested a fuller report and highlighted the need to understand legally obligated services for budget planning.
• Item 5 – Prevailing Wage Report:
  • Speakers praised the compliance work but raised concerns about language barriers for workers and the relatively low amount ($68,000) of back wages recovered. One speaker suggested tying prevailing wage to broader immigration and equity issues.

Discussion Items

• Item 2: Short-Term Residential Occupancy Application and Licensing Fee (Revised)

  • Matt Wood (S Tier Program Manager, Office of City Treasurer) presented a proposal to revise fees effective March 1, 2025, for full cost recovery of program administration and enforcement. Key statistics: Since program inception, over 10,000 licenses issued, $7.9 million collected; projected total revenue by April 2025 $8.5 million; total program costs projected at $9.18 million for the first two years. Proposed fees: Tier 1 license fee from $100 to $173, Tier 2 from $225 to $262, Tier 3/4 from $1,000 to $1,090; application fees adjusted. The program is 99.9% cost recoverable under Prop 26.
  • Councilmember Elo Rivera expressed concern that the fee does not cover broader costs such as police, fire, trash services, and enforcement of illegal ADU operations. He requested additional benchmarking and analysis of all eligible expenses, including public safety costs. Norma Medina (DSD) confirmed enforcement on tier 2 (home share) and ADU complaints.
  • Council President Pro Tem Lee questioned proactive enforcement and noted that San Diego’s fees appear lower than some other cities. He emphasized matching fees to service levels and suggested the fee study should account for enforcement outcomes.
  • The committee voted unanimously (4-0) to advance the item to City Council with a request for additional analysis on benchmarking and potential inclusion of other eligible costs.

• Item 3: Committee Priorities and Input for 2025 Work Plan

  • Chair Foster opened the discussion, noting alignment among members on priorities such as equitable contracting, new revenue, and supporting communities of concern. He emphasized not balancing the budget on vulnerable populations and the need for transformative operational changes.
  • Vice Chair Moreno highlighted two priorities: (1) Coordinating with the rules committee to clarify the process for adding unclassified positions outside the regular budget cycle, and (2) Developing a multi-year plan to protect infrastructure and services in communities of concern from budget deficits.
  • Councilmember Elo Rivera seconded and expressed confidence in the committee’s composition to address challenges.
  • Council President Pro Tem Lee underscored the importance of collective input during a challenging budget year.
  • Chair Foster added that key performance indicators (KPIs) and a broad contracting review will be central to the work plan.
  • The committee unanimously approved the staff recommendation to create a 2025 work plan based on member input.

• Item 4: Report from Office of City Attorney on Services Obligated Under the San Diego Charter (Informational)

  • Chief Deputy City Attorney Kathy Steinman presented a preliminary update to a 2011 report, summarizing charter obligations: city must staff certain offices, conduct redistricting every 10 years, appropriate funds for debt service, and use proceeds from property sales for capital improvements (Charter Section 77, with possible one-year suspension by two-thirds council vote). Charter Section 11.1 requires prioritizing police protection. The report will be updated as soon as possible.
  • Chair Foster noted the importance of understanding charter obligations during the budget process and requested further examination of public health obligations (transferred to county via Prop R) and homelessness spending.

• Item 5: Fiscal Year 2024 Prevailing Wage Annual Report (Informational)

  • Christina Gagger (Chief Compliance Officer) and Aaron Lunis (Program Manager) presented: In FY24, the city executed 726 contracts subject to prevailing wage, monitored 1,090 contracts, conducted 596 preconstruction meetings, 346 site visits, interviewed 401 workers. Recovered $68,000 in back wages, issued 46 violation notices to the state Department of Industrial Relations (DIR), and reported 35 apprenticeship violations.
  • Councilmember Elo Rivera questioned the gap between reported violations ($485,000 assessed) and wages recovered. Staff explained many violations were resolved through contractor corrections, with one contractor accounting for $300,000 in uncured fringe benefits sent to DIR. The program focuses on voluntary compliance; penalties are assessed by the state. Staff noted potential future tools such as withholding payments and contractor debarment.
  • Chair Foster highlighted the state requirement for enforcement and the potential for personal liability of officials, and encouraged exploring legacy labor compliance program certification to recover costs.

Key Outcomes

• Consent Agenda: Approved unanimously (4-0).
• Item 2 (STR Fees): Motion to advance to City Council with additional benchmarking analysis and exploration of broader cost recovery (including police, fire, and enforcement costs). Passed 4-0.
• Item 3 (Work Plan): Motion to approve staff recommendation for 2025 work plan based on member input. Passed 4-0.
• Item 4 & 5: Informational items; no votes required. City Attorney’s office will provide an updated charter services report. Chair Foster directed further discussion on prevailing wage enforcement tools and potential state advocacy.
• The next regularly scheduled meeting of the committee is Wednesday, February 5, 2025, at 9:00 a.m.